About TOKAI Group
December, 2018
TOKAI Holdings Corporation(Code: 3167)

Overview of TOKAI Holdings
Established in 1950. Decision to change to a holding company structure in 60th year, transition to new
structure the following year. Currently in 8th year
Merger between TOKAI CORPORATION (First Section), a provider of LP gas, and VIC TOKAI(JASDAQ), a communications and CATV subsidiary
Company nameTOKAI Holdings Corporation

President and CEO

Katsuhiko Tokita

Stock market listingFirst Section, Tokyo Stock Exchange (code no. 3167)

Listing date

April 1, 2011

Group companies

24 consolidated subsidiaries, 5 affiliates (as of September 2018)

Sales, operating profit¥186.1 billion, ¥11.0 billion (FY2017)

Employees

3,970

Main businesses（FY2017）
Note: Percentage figuresindicate proportion of
total sales
Changes in management
structure

Gas and Petroleum

:

40.9%

(sales: ¥76.1 bn; operating profit: ¥7.4 bn)

TOKAI, TOKAI GASInformation andCommunications

:

27.4%

(sales: ¥50.9 bn; operating profit: ¥3.2 bn)

TOKAI COM

CATV

:

15.3%

(sales: ¥28.4 bn; operating profit: ¥3.6 bn)

TCN

Building and Real Estate

:

10.6%

(sales: ¥19.8 bn; operating profit: ¥1.3 bn)

TOKAI

Aqua

:

3.3%

(sales: ¥6.2 bn; operating profit: ¥0.2 bn)

TOKAI

Other

:

2.5%

(sales: ¥4.7 bn; operating profit: —¥4.7 bn)

1950 Established as Yaizu Gas Co., Ltd.
1987 Listed on First Section of Tokyo Stock Exchange, name changed to TOKAI CORPORATION
2011 TOKAI Holdings Corporation established1

Performance of major businessClassified into six segments: gas and oil, information and communication services, CATV, building andreal estate, aqua, and others.
The scale of the business is net sales of ¥186.1 billion and operating profit of ¥ 11 billion (FY2017
results)
Gas and oil (40.9%) and information and communication services and CATV (42.7) account for over
80% of sales, and these are the mainstays of business

7.4

4.7

Operating profit（2.5%）
Gity gas
1.0

6.2

11.0 bn¥（3.3%）

19.8（10.6%）

28.4（15.3%）

3.2
LP gas64.5

Sales

Communication for corporate users
System development
Data center

76.1

2.2

（40.9%）

3.6¥186.1bn

Communication for corporate users
System development
Data center
Mobile18.2
Broadband
4.6
28.1

LP gas
6.4
City gas
11.6

1.3
Broadband
2.8

50.9

0.2

（27.4%）

Gas and oil

Information and communication

CATV

Building and real estate

Aqua

OthersMobile-0.8
Indirect cost
-1.0

Gas and oil-4.7

Information andcommunication

CATV

building and realestateAqua

Other adjustments

2

Diversify business related to living with gas as the starting point
Expanded our own infrastructure services while responding to social issues, population structurechange, consumer needs
Provided "Energy" "Information and communication" "Housing equipment" "Security" "Insurance""Nursing care" and others
1950s

1960s

1970s

Post-war expansion in housing
volume (through 1970)1980s
Property crime peaks(1985)

1990s

Convergence of broadcasting
and telecommunications (2005)

Windows95
release(1995)

Second generation baby
boom (1971–1974)

2000s

2010s
Elderly ratio reaches 1 in 4
(2014)

Revision to the NTT Law(2001)Aqua

2007

Security

1984

1970
City gas

1950

WWW

WWW

Cable TV

Internet

ADSL/FTTH

Mobile

1988

1996

2001

2006

CATV

1959

1972

Developed LP gas distribution
system using large-scalecomputers, providing theopportunity to promote Information
and Communications business

SIer

Systemdevelopment

Data center

1983

1985

Telecoms
network

2001

2011

2016
Transition to a holing company structure

HousingNursingcare

Toward the realization of TLC (Total Life Concierge)

Electricity

1973

BridalCity Gas
liberalization (2017)
Electric power
liberalization (2016)

Insurance

LP gasPresent3

Stable revenue model with charge accumulation
2.88 million customers nationwide, customer share in Shizuoka prefecture overwhelming(3 households and 2 households are our customers)
Gas and CATV business occupying more than half are strongly connected with customers and being
foundation of stable earnings

Customers
Aqua

3,500

（Thousand）

Gas（LP・City
gas）

2.89mnOthers16

as of Sep. 201839
Shizuoka

67
3,000

CATV 105

2.88mn customers

The gas and CATV business has strong
connection with the community andcustomer is more than half

as of Mar. 31, 2018
By areas

as of Mar. 31, 2018
By services

2,500

123

Breakdown of

Breakdown of

2.88mn customers

127

103
2,000
Kanto

Communications (Hikari Collaboration +conventional ISP + mobile)

1,500

740
thousandin FY03/01

1,000

500

-

4

The main services are characterized by a high profit margin
Monthly sales and gross profit ratio per one main service
Our all major services are above retail average (28.6%).
（Yen/Month・Item）※Results at the end of March 2018

8,000

7,000

100.0%
90.0%

6,838
6,377

80.0%

6,000

70.0%
5,000

60.0%

4,305

4,061

4,000

3,000

2,000

40.0%

2,536

71.5%

50.0%

30.0%
62.0%

85.8%

1,000

29.4%

40.6%

20.0%
28.6％
10.0%

2017 Basic Survey on
Corporate Activities by
Department of Ministry of
Economy.
(Based on actual results for
FY2016)
Average for retailers

0.0%

0

LP gas* Sales and gross profit margin of LP gas and city
gas include equipment sales etc. in addition togas sales

City gas

Aqua

CATV

Sales per item

Gross profit ratio per item

Hikaricollaboration

5

TLC model which can be established in Shizuoka prefecture
It is our basic strategy to promote multiple contracts by community-based sales
Gas and CATV business is the basis for TLC because customer contact points
are strong, and providing a high rate of multiple service contracts
Multiple contract rate is 24.4%(13.8% in the whole company)

Two in three households in
Shizuoka Prefecture are ourcustomers

ShizuokaPrefecture

Kanto area

24.4%

7.2%

(TOKAI Group household contracts)

940 thousand(Households in Shizuoka Prefecture)

Of this figure, gas customers are especiallyeffective targets for cross-selling the Group’s
other services

1,470 thousand

※

CATV

City gas

LP gas

63.8%

37.0%

22.8%

(As of September 2018)※ The number of households in Shizuoka Prefecture is as of October 1, 2018 according to “Shizuoka
Prefecture Population Statistics, by City, Ward, Town, and Village,” Shizuoka Prefectural Government.
Contracts by the TOKAI Group as of September 30, 20186

Group vision "TLC"
Basic concept of service provision by TLC (Total Life Concierge)
Provide diversified lifestyle related services at one stop · one contract · one call center

TLC (Total Life Concierge) offers various
lifestyle-related services on a one-stop basis

Contract,
inquiries,
payments＋
Point benefits

One Call Center

Customers

One contract

City gas

ＬＰ gas

Housing

Aqua

WWW

CATV

Nursing
Care

Cable TVADSL/FTTH

BridalSecurity

MobileInsurance

Electricity

7

The TLC is effective for continuing transactions, multiple contracts
Institutionalized in December 2012 to further promote long-term continuity and multiple
transaction (cross-selling) measures for 2.89 million customer base.
TLC points are awarded according to the usage fee of group service (1 point of basic point
per monthly usage fee of 200 yen) and the number of contracts of service (bonus points 50
to 500 points according to the number of contracts).
As a new cross-selling measure, TLC Kasatoku-plus, which provides customers with multiple
incentives, started in May 2017
TLC Members exceeded 700,000

757（Thousand）

806

Group
Services

LP GasCity Electri Intern
LIBMO CATV
Gas cityetIntellig
House
Securient Aqua
Renov
ty
home
ation

699
◎
586

◎

◎

◎

◎

◎

◎



*Give 1 TLC point per 200 yen of monthly usage fee for target 6 service(City gas requires two or more contracts including city gas and other designated services)◎

366
Bonus points

92

Basic points

491

306

◎

Kasatoku
points* Started in May
2017

End of
End of
End of
End of
End of
End of
End of
End ofMarch 2013 March 2014 March 2015 March 2016 March 2017 March 2018 September March 2019(plan)
2018

◎

◎

◎

◎

◎

◎

◎

◎



※ Receive TLC points according to the number of contracts of the target 9 service
2 contracts → 50 points · 4 contracts → 300 points
3 contracts → 150 points · 5 contracts → 500 points

◎

◎

◎

◎

◎

◎

◎

◎

◎

◎

※ Present TLC points if you newly subscribe to the target service of the group
200 points a month for each new contract

8

By cross-selling, the cancel rate be halved
The contribution to the cancel rate is a decrease of 50%, which is 5.8%
for multi-trading customers, with a rate of 11.0% for single
TLC members cancel rate is 8.3%, non-members are 11.0%, about 30% less. With
TLC membership system, cancellation can be suppressed.

Cancel rate of multiple trading customers (Result of FY2017)
MemberNot a member

Total

Multiple trading
customers（a）

5.3%

7.0%

5.8%

Single trading
customers（b）

9.9%

11.3%

11.0%

計

8.3%

11.0%

10.3%

（b/a）

The cancel rate is reduced by about
30%

- 50%
9

Direct sales capability to acquire 300,000 customers per year
In the LP gas business, operate in existing areas and new areas.
In the CATV and city gas business, operate around the service area.
In the information and telecommunications business, mainly operate at ourown booth in a major home electronics store.
In the aqua business, operate at our own booth such as in Aeon (Facility ofmajor retailers in Japan) and other large commercial facilities.
(Thousand)Number of acquisition (registration)
M&A

LCV 121 thousand
KCT 104 thousand

Dream Wave Shizuoka
46 thousand

225

Tokyo Bay Network 259 Thousand
TV Tsuyama 13 Thousand（Currently Toco channel Shizuoka）

273

46

286
292

FY2007

320

319

311

FY2008FY2009FY2010Start of Aqua business

343

321

315

FY2011FY2012FY2013Nationwide sales of Aqua business

277

279

FY2014FY2015247

FY2016

Start sales of Hikari collaboration

274

FY2017FY2018（Plan）LIBMO sales started

10

Sales and service structure rooted in areas and customers
A total of 1,600 managers meet customers face-to-face and propose solutions
Call centers help reduce cancellations and proactively support contract
acquisitions

129

sales locations** Including three overseas locations (Shanghai, China;
Taipei, Taiwan; Yangon, Myanmar)

40 million

Yangon, Myanmar
Shanghai, China

customer contact points

Taipei, Taiwan

1,600

Headquarters
Branch sales offices

regional managers
LP gasSales person

630

Delivery239

Meter reading/Collection money

444

Security

276

Total

1,589

434

TG
63

Call center

CATV
133

Around400

operators atnine locations throughout Japan11

Own competitive optical trunk line network
Built a proprietary fiber optic network spanning 6,000 km
Constructed to connect the high-demand Kanto Region to Okayama,
passing through Tokyo, Nagoya, and Osaka

The total distance of the optical trunk line,
which is the backbone of the group's
information and telecommunications business
and CATV business:
Approx.

6,000km( Breakdown of total laying distance )*As of March 31, 2018
Telecommunication business 2,608 km
CATV business
3,527 km

LCV Data Center※Including trunk and branch line (excluding lead-in line)

NagoyaOkayamaAtsugi Otemachi
Osaka

Yaizu

Okayama Data Center
Shizuoka Data Center

12

Achievements of IP13 and IP16 （PL）
Transformed from "individual management" to "group management" by holdings structure.
Made remarkable results through “improvement of finance” at IP13 and “strengthening of profitability”
of IP16 “growing”.
Achieved operating income of 12.8 billion yen (record high) in FY 2016.
Net income tripled. (5.1 billion yen increased) (2.2 billion yen ⇒ 7.3 billion yen)
Earnings per share are more than doubled (30.48 yen ⇒ 64.46 yen)Three times more than in
FY2010LPG purchase, BB · Aqua upfront
cost increased

Improve profitability byeliminating upfront costs

2.2

2.7

3.1

FY2011FY2012

7.3
3.9

3.5

FY2014FY2015

2.6

12.8
10.8

FY2010

10.9
9

8.9
7.4

FY2013Net Income（¥bn）
8.2
More than doubled level !

FY2010FY2011FY2012FY2013

FY2014FY2016FY2015

Operating Income（¥bn）

30.48

27.17

29.85

FY2010FY2011FY2012

64.46

34.16

30.01

FY2014FY201522.67

FY2016FY2013

Earnings per share (Yen)FY201613

Achievements of IP13 and IP16 (BS)Transformed from "individual management" to "group management" by holdings structure.
Made remarkable results through “improvement of finance” at IP13 and “strengthening of profitability”
of IP16 “growing”.
Interest bearing debt halved. -69.9 billion yen (124 billion yen ⇒ 54.1 billion yen)
Equity ratio improved significantly （7.7％⇒34.5％）
Market capitalization is more than doubled (52.7 billion yen ⇒ 119 billion yen)
34.5
14.3

7.7

18.6

21.6

FY2012FY201325.7

25.6

FY2014FY2015

Half balance after HD
structure

124.0
105.7

FY2010FY2011

93.7

Equity ratio（%）

85.8
73.1

71.4

398

340

521
326

586

FY2016
856

351

54.1
119.0

More than doubled level !

FY2010FY2011FY2012FY2013

FY2014FY2015Interest bearing debt（¥bn）

52.7

61.7

FY2010FY201150.5

54.4

FY2012FY201380.8

81.5

FY2014FY2015FY2016

Market capitalization(¥bn) /Stock price(Yen)FY2016※Including own shares

14

New Medium-Term Management Plan
IP20 “JUMP”

15

Numerical targets include doubling sales in
FY03/21 versus FY03/17
Increase sales by 1.9 times compared with FY2016 to 339.3 billion yen, and operating
profit grow to 22.5 billion yen 1.8 times. And the number of customers is also 1.7 times
as high as 4.32 million.
Target interest-bearing debt/EBITDA ratio of 2.6x, equity ratio of 31.6%, and ROE of
13% by management focused on capital efficiency.
(Billions of yen)

FY03/17

FY03/18

ResultResult(Traget)FY03/19

FY03/20

FY03/21

TargetTargetTarget

Sales

178.6

186.1

(189.4)

202.0

224.4

(+90%)

393.3

Operating profit

12.8

11.0

(11.4)

14.0

16.2(+80%)

22.5

Net income

7.3

6.6

(6.4)

7.9

8.7

(+60%)

11.5

Total assets

161.1

166.4

(169.8)

173.8

191.2

(+80%)

283.4

1.9x

1.9x

(2.0x)

1.7x

1.8x

2.6x

Equity ratio

34.5%

36.3%

(33.9%)

35.6%

34.9%

31.6%

ROE

15.2%

11.4%

(11.1%)

12.8%

13.0%

13.0%

Customer numbers(millions)

2.56

2.88

(2.88)

2.99

3.72

Interest-bearing
debt/EBITDA ratio(+70%)

Over 4.32

Note: () denotes increase versus FY03/17

16

M&A strategy in IP 20 "JUMP"In the four years from FY2017, we will carry out the following M&A strategy.

Investment fund of 100 billion yen for 4 years

Strengthen core business
Further expansion of the LP gas, city gas, CATV,
information and communication businesses.
Expanding customer base through M&A and Alliance.

Acquisition of new service field
Acquire new services to promote future growth.
Not only acquisition but also viewing capital alliance.

17

Continue to promote M&A to expand customer baseIn the previous fiscal year, Tokyo Bay Network Co., Ltd. and TV Tsuyama Co., Ltd. became
consolidated subsidiaries.
The number of businesses that can not respond with advanced broadcasting such as 4K and large
capacity of communication contents is expected to increase.
Among them, we will chose companies that can utilize our know-how and can expand TLC.

Tokyo Bay Network Co., Ltd（Customers about 260,000）

TV Tsuyama Co., Ltd

Tuyama City

（Customers about 10,000）

Chuo
Ward
Koto
Ward

Kurashiki City

（Okayama Pref.）（Tokyo 23 wards）

Continue selecting target company “Aggressively”

18First step in the broadening of the city gas business
In April 2018, we signed a contract on the transfer of the gas business operated by Shimoda Town,
Gunma Prefecture, and in October we acquired approval from the Kanto Bureau of Economy, Tradeand Industry for business acquisition. Business inheritance from April 2019.
We took the first step towards broadening the city gas business.
Based on this, we aim to further expand the business of the city gas business.
Contract concluded on Shimonitamachi gas business transfers.
Acquisition of approval for business
transfer in October 2018
Business inheritance from April 2019

Shimonita-machi（Gunma Pref.）Broadening of
the city gas business

19Create synergies in the information andtelecommunications fieldBecoming a consolidated subsidiary company Size Co., Ltd., which is mainly engaged in the provisionand development of questionnaire systems
Concluded a capital and business alliance agreement with "Triple Eyes" company, which has strengths
in advanced technology fields such as AI, IoT and block chains
Combine each other's strengths to create synergies and further expand the group's information andtelecommunications business(Strength · Area)
In-house developed
questionnaire system
Extensible, custommade

M&A(Strength · Area)
Network line service
Data center operation
service
System development

Capitaltie-up(Strength · Area)
Advanced technology
such as AI, IoT, blockchainsCombine each other's strengths to create synergies

Further expansion of group information and telecommunications business 20

Started consideration for entry into
a new business domain
In August 2018, we concluded a capital and business alliance agreement with "Minnadenryoku, Inc." of a new power venture company entity and started full-fledged
examination to enter the renewable energy field.
From 2019 onwards, the number of photovoltaic power generation that will expire theFeed-in Tariff system (FIT) will increase, companies selecting renewable electric power will
increase from the standpoint of RE100 *1, ESG *2, CSR.
We will utilize "Minna-denryoku, Inc." technology and know-how and link it to our business.

Capitaltie-upEnter the renewableenergy businessIndustry's top level renewableenergy ratio.
Unique power trading platform.

‘Minna-denryoku, Inc.’s technology
and know-how will be utilized tosell renewable electric power

Renewable energy business＊1．RE100: an international consortium in which member companies are committed to use electricity generated from 100% renewable energy＊2．ESG: initials of indicators used to determine whether or not a company will be able to realize sustainable growth: Environment, Social, and Government21

Prioritize areas already expanded or neighboring
Targeting operators in the areas already established in the neighboring of the LP gas
advanced area (blue in the figure below) and group projects (other than insurance, aqua,industrial etc.) other than the LP gas business.
From the viewpoint of population dynamics and consumption, priority is given to the
Pacific side and the Setouchi district.
New Area (FY 2015)

3 bases

New Area (FY 2016)

2 bases

New Area (FY 2017)

2 bases

New Area (FY 2018)

1 baseNew Area (Planned)

2 basesMiyagiTajimi officeSendai officeSuwa office（tentative）
Iwaki office

Gifu office

NaganoTokyo
Already established area (LPG)

OkayamaKyushu office

Shizuoka

Already established area (Other than LPG)Osaka

New area target

Toyokawa
officeMie
Nishi Mikawa
officeFukuoka

Mie Office（tentative）
Okayama officePlanned area

Entered area (other than LPG)
NaganoInsurance Division

Osaka

Aqua Division

Fukuoka

Industrial, Building Management
Support Department

22

Progress of "ABCIR + S" strategy
A(AI), B(Big Data) , C(Cloud) , I(IoT) , R(Robotics) + S(Smart Phone)
Strategies for the Group's technological innovation.
A coined word of each initial letter.

23

ABCIR+S strategy deliberation progress
In addition to marketing capabilities accumulated since the Company was founded, the use of
ABCIR+S to focus efforts on strengthening customer contact, developing new businesses,
and improving operational efficiency will be an important strategy going forward.
Deliberations are being advanced by a dedicated organization, the Head Office for NextGeneration Business Strategy.
ABCIR+S concept
IoT

Marketingcapabilities

CATV

Cloud

SurveillancecameraBig data
AI
Network（traditional strength)
AI speaker

Robotics
Smartphone

Dedicated organization “Head Office for Next-Generation Business Strategy”
will use ABCIR+S to focus efforts on strengthening customer contact,

developing new businesses, and improving operational efficiency.

24

Creating new marketing methods
Began distribution of the TLC Points app in October 2018
Timely provision of the Group’s service, campaign, and event information to enhance TLC userconvenience by enabling members to confirm and use their accumulated TLC points
Started creation of digital marketing platform as base for converting customer behavior into big
data within owned media and realizing marketing in line with customer attributes andpreferences
TLC Points app

Digital marketing
platformMarketingMarketing

TLC member
service website

Service websites

Customerdatabase

Data
link
Digitalmarketingtool

MarketingMarketing25

Envisioned goals for ABCIR+S
Develop new marketing methods based on digital marketing platform
Expand functions of TLC smartphone app, capture customer data in digital marketing platform,
and implement proposals tailored to customer attributes and preferences
Also leverage the above in the development of new TLC services

Total Life Concierge

Customers

TLC Points app

ExpandedfunctionsCustomer information
Servicewebsites

New marketing methods

Digitalmarketingplatform

City gas

LP gasEnergyElectricity

RenewableenergyInformation andcommunication
Low-cost
mobile services

Internet

CATV
Facilities andequipment

Facilities

Housing

Customer
information

Renovation
Insurance

Security
Security

Respond to customer needs

Nursing
care

Healthcare

Marketing

Proposals tailored to customer attributes and preferences

Aqua

Urban
farming

Medicalcare

Education

26

Expansion of "TLC" service

27

Our group's new service enriching our customers' lives
Based on the philosophy that provides customers “Safe and Secure" “Convenient and Comfortable" “Joy and Worth living"
Consider entry the fields of agriculture, renewable energy, medical care and education, that are new business field and growing field.
The basic concept of the new service is sharing and matching.

Safe and Secure
Full-scale entry into the renewable energy
business by capturing the spread of distributed
energy. Provide new service that shares therenewable energy electricity procured by ourcompany utilizing IT system. Enhance supply ofsafe energy in addition to disaster-resistant LP gas
and community-based city gas.

Convenient and Comfortable

Joy and Worth living

Provide new convenience and comfort by adapting
progress IT to living. In addition, provide newservices to share skills or time such as
housekeeping substitution etc utilizing IT system.
Strengthen existing services even in response to
the latest technology.

Heading towards era of 100-years-life, healthy life
expectancy further extends. We will develop newservices in field that provide joy and worth living
through health services, leisure services, andcommunication.

Sharing / matching basic concept (Things, Movements, Spaces, Skills)

Renewable energy

Share × Things (Electric)

Livelihood support

Leisure fulfillment

After April 2019.

Share × Skills

Provide new service
related renewable energy.

After February 2019
Starting rental farm service

Housekeeping substitution

The purpose· Expand popularization ofrenewable energy· FIT Expiration correspondence· Self consumption· Customer's cost merit

The purpose
・Enriching leisure time・Human interaction

Share×Movements

Rrental cycle

Medical care

Share×Skills（Medical technology）
Health care services
Health examination, exercise
instruction
Set of meal instruction
The purpose
・Extend healthy life
・Offering a worth living

Education

Share×Skills（ Knowledge ）Share×Spaces

Share space

Existing business
EnergyInsurance
CATV

City gas

ＬＰ gasLife insurance

Property
insurance

Housing ·Renovation

CATV・ Completely self-sufficient housing
WWW

Electric
power

・Multi-channel
broadcasting・ 4K/8K
compatible broadcast

Machinesecurity

Deliverywater

Internet

Share×Spaces（Farmland）

Lifelong learning for seniors(video distribution service)
Learning matching service

Mobile・Softbank・Kakuyasu
SIM・Hikari Collaboration
・CATV FTTH
・Smart house·Day service·Short stay
·Paid nursing home

・Wedding
・ Restaurant

RridalNursingCare28